Market outlook for the week of 20th-24th April
The highlight for Monday will be Canada's CPI release. This will be followed by New Zealand's inflation data on Tuesday, which will be a busy day. The U.K. will publish the claimant count change, average earnings index 3m/y and the unemployment rate while the U.S. will get the ADP employment change, retail sales m/m and pending home sales m/m.
Fed Chair-designate Warsh is also scheduled to testify before the Senate Banking, Housing, and Urban Affairs Committee in Washington, D.C., as part of his nomination process.
On Wednesday, the U.K. will publish its inflation data while Thursday will bring flash manufacturing and services PMI releases for Australia, the eurozone, the U.K. and the U.S.
Finally, on Friday, the U.K. and Canada will release retail sales m/m data, while the U.S. will publish the revised University of Michigan consumer sentiment and inflation expectations.
In Canada, the consensus for CPI m/m is 1.1% versus 0.5% previously. Median CPI y/y is expected at 2.4% vs. 2.3%, trimmed CPI y/y is seen holding steady at 2.3%, and common CPI y/y is projected to rise from 2.4% to 2.6%.
March inflation is expected to grow, driven largely by a sharp 21% increase in gasoline prices. Headline CPI is likely to rise to around 2.5% y/y from 1.8% and core inflation is projected to edge higher to around 2.2%.
This rebound is mainly energy-driven, as last year’s carbon tax effects fade and fuel prices continue to climb. Inflation could move above 3% in April, although temporary tax relief at the pump coming in effect this week may help limit the increase, according to RBC analysts. Meanwhile, food inflation is expected to ease as annual distortions like the Feb. 2025 federal HST/GST holiday fades out of the data.
Underlying price pressures remain relatively contained for now, giving the Bank of Canada some scope to look through the energy-driven spike, provided the increase stops. The Bank is also likely to wait for the results of the USMCA renegotiation and might not consider a rate hike until July, Wells Fargo analysts said.
In New Zealand, the consensus for CPI q/q is 0.8%, up from 0.6% previously. Q1 inflation is expected to show a modest increase, driven by higher food and fuel costs. However, annual inflation is projected to ease from 3.1% to 2.8%, coming in below the latest RBNZ projections, while core inflation is expected to remain firm.
Westpac analysts note that this dip does not reflect the full picture. The easing in annual inflation in March is likely to be temporary, with inflation expected to rise again through the middle of the year largely due to higher oil prices and their broader pass-through to the economy. Annual inflation could reach around 4.3% by mid-year.
In the U.K., the consensus for the claimant count change is 21.4K compared to 24.7K previously. The average earnings index 3m/y is expected at 3.6% vs 3.9% prior, while the unemployment rate is projected to remain unchanged at 5.2%.
This week’s data should provide insight into how the U.K. economy is being affected by the Middle East conflict. The Bank of England will closely monitor labor market indicators alongside the latest inflation prints.
Labor market data points to a gradual cooling. Wage growth is expected to soften over the past three months, suggesting weaker income momentum. While the unemployment rate is likely to remain steady, it is still elevated. Overall, the data indicate a softening labor market rather than a sharp deterioration.
On the inflation side, CPI y/y is expected to rise to 3.3% from 3.0%, while core CPI y/y is projected to remain unchanged at 3.2%. The increase in headline inflation is mainly driven by higher energy costs and the steady core reading suggests that the earlier disinflation trend may have stalled.
From a monetary policy perspective, the BoE is likely to remain data-dependent. A stronger headline inflation print alone could be an argument for tighter policy, but softer wage growth, sluggish economic activity and an elevated unemployment rate support a wait-and-see approach. Rates are likely to remain unchanged for now with an upside risk if inflation begins to feed more broadly into wages and prices.
In the U.S., the consensus for retail sales m/m is 1.4% compared to 0.6% previously, while core retail sales m/m are expected to rise 1.3% vs 0.5%.
Early signs suggest consumers have largely absorbed the initial spike in fuel prices. High-frequency card data point to steady spending into early April, with March retail sales likely to show a strong headline increase of around 2%. However, this strength appears partly driven by price effects.
Since retail sales are reported in nominal terms, a significant portion of the increase likely reflects higher gasoline prices rather than a genuine rise in volume. While overall spending has remained supported, underlying demand looks softer once adjusted for higher goods prices, which rose notably during the month.
Looking ahead, consumption is expected to remain resilient, though at a slower pace. Support from tax refunds has helped offset the impact of higher fuel costs so far. Still, if elevated prices persist and broaden, pressure could begin to build on household finances.
Regarding the Federal Reserve, focus starts shifting to Kevin Warsh, as his April 21 confirmation hearing brings both policy and politics into the spotlight, even as the Fed enters its pre-meeting blackout period.
For markets, the key question is what Warsh will signal since he has been largely silent in recent months. The hearing will offer an opportunity to gauge his views on topics such as the current rate level, the longer-run neutral rate and his approach to tools such as forward guidance and the balance sheet.
Once seen as more hawkish, he now faces added scrutiny over how closely his views align with Donald Trump, who has advocated significantly lower rates in contrast to current chair Jerome Powell.
According to ING, Warsh is likely to strike a measured tone, suggesting that lowering the rate could be appropriate over time, while emphasizing the need for credible justification to maintain market confidence. Part of this argument may hinge on stronger productivity driven by technology and AI, a perspective that seems to align with the Fed’s more optimistic long-term growth outlook.
At the same time, the political backdrop remains uncertain. Thom Tillis continues to oppose the nomination amid what he considers to be an ongoing "vindictive" Justice Department probe at the Fed, raising the risk of delays. That uncertainty could extend Jerome Powell’s tenure in an interim capacity if a replacement is not confirmed in time.
In the U.S. the consensus for the revised UoM consumer sentiment is 48.4 vs prior 47.6, marking a modest improvement but still reflecting a cautious backdrop.
As for inflation expectations, short-term measures like the 1-year outlook could see some adjustments, as changes in energy prices tend to pass through quickly. However, longer-term expectations in the 5-to-10-year range remain stable, holding steady despite the noticeable increase in the preliminary short-term reading, RBC analysts said.
This article was written by Gina Constantin at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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